Economics

Housing markets

Primed again

IN UNSURPRISING but good news, Case-Shiller reported new home price data this morning that showed a definitive upward move in markets across the country. From March to April, Case-Shiller's 10- and 20-city indexes rose 0.7%, seasonally adjusted. All but three of the tracked markets saw month-on-month increases. Half of tracked cities notched year-on-year price increases in April.

Price rises have looked imminent for some time. Sales figures have been trending upward and inventory numbers are at remarkably low levels. Rents have also been increasing, making home purchases look ever more attractive. There is still an ample stock of distressed and bank-owned homes to work off, but America seems to have achieved bottoms for both sales and prices. Housing markets have adjusted.

This turning point could be a source of considerable strength for the American economy. Rising prices should have a direct wealth effect for owners and should sharply limit new defaults and foreclosures. As a result, mortgage lending should begin to look much more attractive. A return to something like normal lending conditions could turn fledgling increases in sales and construction into strong increases, boosting GDP and construction employment.

These developments are just one of the reasons why it strikes me as wildly fallacious to say that the Fed is running out of ammunition or getting less bang for its buck. The improvement in housing markets represents the clearing of one of the principal monetary-policy transmission channels; those low rates will begin to have a bit stimulative impact if—and this is a big if—the Fed signals that it's not going to pull the rug out from under everything once inflation creeps above 2%. That's a huge constraint. If builders, lenders, and buyers all suspect that rates will start going up when inflation tops 2% and keeps rising, they'll be a lot less anxious to buy in to a strong recovery. If the Fed were to signal a more relaxed approach to inflation while unemployment remains elevated, however, the recovery would be on. A healthier housing market means that the Fed's ability to manipulate the economy is as complete as ever.

Shiller only surveys 20 cities. When national stats are used, the Realty Bubble Monitor has found the bottom for Existing Homes was set in Jan/2012 and homes are presently selling for $13,000 more than last year. New Homes bottomed in Oct/2010 and are up $30,000. Sales volume for both categories has also bottomed for some time.

HFG once again shows us all how everything in the nation is exactly explained by what's going on in Cleveland OH.

And I bet Cleveland is even recovering. You quoted a decline from 2009 to 2012, a nice 3 year number. I bet prices are down even more from 2007-2012. But from 2011-2012 the housing market is flattening and even rising, even in Ohio.

Your unending pessimism and crotchety hatred of good news is well-noted, and easily ignored. But I liked the 3 year timespan touch.

Not if he reads any news where Lawrence Yun, chief economist of the National Association of Realtors is cited (which has been quite a few). His rosy assessments month after month at the heart of the crisis would have been entertaining to read if they weren't so wrong.

Before the housing bubble the housing market was not a national market. The cheerleaders on TV taught you that the market is national.

So what if foreign investors are overpaying in places like New York, Miami, etc. So what if prices in San Francisco are going up again because suckers bought Facebook stock from the insiders who cash in and are buying houses at high prices.

As for the 3 year, STATE LAW mandates an appraisal every 6 years, with a mid-period update.

(You would have "learned" that by reading the link I supplied, but...)